Credit Money Research Articles

Analysis of the Mechanisms Behind the "China Money Mystery"

The growth rate of China's broad money supply (M2) significantly exceeds the combined rates of economic growth and inflation, leading to a continuous rise in the ratio of M2 to GDP. This phenomenon is referred to as the "China Money Mystery." The explanation for this phenomenon involves several factors. Firstly, interest rate and exchange rate controls in the financial market lead to excessive increases in money demand. Secondly, financial repression results in excessive use of indirect financing and a lack of investment channels, further distorting money supply. Thirdly, the financial hoarding theory suggests that a large amount of money flows in the virtual economy rather than being invested in the real economy, thus failing to induce noticeable inflation. Finally, the applicability of traditional quantity theory of money in the modern credit money system is gradually diminishing, failing to explain the relationship between money supply and prices. By integrating these factors, a better understanding of the abnormal monetary supply phenomenon in China and its implications can be achieved.

Manifestations of Infringement on the Public Authority's General Jurisdiction in Currency Issuance and Management from an Islamic Perspective

Objectives: This study aims to identify and analyse the forms of infringement on the sovereign right of public authority in the issuance and management of currency, particularly in the context of the fractional reserve banking system and the technological advancements facilitated by globalisation, which have enabled the creation and promotion of virtual currencies. Methodology: The study adopts a composite method that combines historical induction and logical reasoning to explore the forms of infringement on the general jurisdiction of the authority associated with both traditional and emerging forms of currency. Findings: The study concludes that safeguarding public authority's exclusive and disinterested right in currency issuance and management is a priority in Islamic legal policy. Such necessitates caution against forms of infringement that violate this right due to their impact on the fairness and efficiency of the monetary system. Originality: This research's originality lies in its characterisation of the generation of credit money and the issuance or mining of virtual currencies as contemporary forms of infringement on the authority's general jurisdiction, akin to the counterfeiting of paper money.

Finansjeryzacja lokalności i kulturowe spojrzenie na pieniądz finansowy

Financialization is “a pattern of accumulation in which profits accrue primarily through financial channels rather than through trade and commodity production”. The expansion of the financial sector is enabled by a credit money mechanism that takes on a fictitious character. As a result, financialization leads to the reproduction of social inequality and the subordination of individual behavior to the logic of financial markets. According to critics of the process, local culture is being destroyed by credit money. In this paper, the author points to the social basis of financialization by demonstrating the ways in which local communities produce money – personalizing it and creating its meaning based on debt relationships. He illustrates the influence of culture on money using the example of microfinance and its criticism. Finally, the author proposes a different perspective on financialization, which – by combining the mutual influence of culture and money – allows for changing the categories of thinking about contemporary sources of locality and the divide between the global and the local. Key-words: financialization, microfinance, money theory, credit money, debt relationships, local communities

Origins of money: a Motivation & Sedimentation Model (MSM) analysis

Abstract Few other social technologies and institutions are more consequential to human societies than money. Yet money remains a deeply perplexing phenomenon. On the one hand, it is a pan-human system of valuation, but on the other, it is conventional and variable in its uses. While it is controversial if money instantiates a fully-fledged sign system, it is rife with semiotic capacities. To present an illuminating analysis of money is thus a test case for the Motivation & Sedimentation Model (MSM) of meaning making, with roots in the phenomenology of Husserl and Merleau-Ponty. Using MSM, we analyze two origin accounts of money: the commodity money account evidenced in archaic and classical Greek coinage, and the credit money account exemplified by early findings in Mesopotamia. Both accounts focus on the interactions between the three levels of MSM: the pre-signitive Embodied, the cultural Sedimented, and the interactional Situated levels of meaning and propose different series of “loops” to account for the genesis of money. Despite key differences in the two origins, both imply semiotic processes operating according to motivated, and hence non-arbitrary, conventions developing within institutional formations that ultimately influence present day concepts of money.

Evaluation of the Factors Affecting Mobile Money Operators’ Credit Access: A Case Study of Lusaka Central Business District.

Background: The government of the Republic of Zambia had long emphasized the significance of fostering economic growth through enhanced access to financial services. However, the persistent issue of income inequality and sluggish economic expansion underscored the need for targeted interventions. In response, the emergence of Mobile Network Operators (MNOs) in the financial sector, offering a diverse range of services including credit access, represented a concerted effort to address these challenges. Despite these advancements, a comprehensive understanding of the determinants of MNOs' credit access remained lacking, particularly in the specific context of the Lusaka central business district. Consequently, the primary purpose of this study was to rigorously evaluate the various factors that influenced mobile money operators' access to credit within the Lusaka central business district of Zambia. Method: This research employed a case study research design to investigate the factors that influenced credit access for Mobile Network Operators (MNOs) in the Lusaka central business district. A mixed-methods approach was adopted, combining quantitative and qualitative data collection methods. The study's sample consisted of 125 MNOs, which were selected through a combination of simple random sampling and purposive sampling to ensure a representative cohort of respondents. This approach facilitated a holistic exploration of the various factors that impacted credit access among MNOs. Results: The study's findings highlight several key determinants of credit access among mobile money operators. Demographic factors, such as age, emerge as influential, with youths aged 20-34 demonstrating both technical proficiency and a better grasp of credit information. Education levels also prove to be correlated with mobile money service operation, as respondents with higher education levels exhibit greater ease in accessing and understanding mobile money credit services. Network availability emerges as a pivotal factor driving the adoption of mobile money services. However, a notable proportion of respondents expressed challenges in accessing credit through mobile networks. Trust and security concerns are identified as significant barriers deterring potential users from engaging with mobile money services. Conclusion: In light of the study's findings, it is recommended that comprehensive awareness programs be implemented within central business district schools. These programs aim to equip budding entrepreneurs with the knowledge and skills necessary for responsible engagement with mobile money services. By targeting the youth demographic, these initiatives seek to instil soundfinancial habits from an early age, thereby contributing to improved financial access, reduced income inequality, and enhanced economic growth in the Republic of Zambia.

The politics of student loan in Turkey: regimenting the youth through authoritarian debtfarism

ABSTRACT The mass-scale expansion of student loan schemes in Turkey over the last two decades has been accomplished by a governance technique which the article defines as authoritarian debtfarism. By restructuring the Credit and Dormitories Institution (KYK) as subordinated to the executive and insulated from democratic intervention, the authoritarian neoliberal state in Turkey has sought to fulfil its new economic function, i.e. enabling the societal reproduction of the youth by increasing their financial dependency on credit money. The state-led student loan expansion in Turkey emerged in a tuition-free higher education setting without a sophisticated financial infrastructure and in an economic environment marked with perpetual graduate unemployment as well as inflationary pressures on repayment amounts. Based on a detailed interrogation of the official documents and in-depth interviews with defaulters, this article argues that authoritarian debtfarism has imposed a rigid market discipline over the university youth by using non-transparency and arbitrariness as its governance mechanisms. Consequently, future labour of the graduates is put on hold through a long-term debt relation, compelling them to integrate into labour market precariously as a new segment of the relative surplus population.

Monetary architecture and the Green Transition

How to finance the Green Transition toward net-zero carbon emissions remains an open question. The literature either operates within a market-failure paradigm that calls for carbon taxes or cap-and-trade to help markets correct themselves, or via war finance analogies that offer a “triad” of state intervention possibilities: taxation, treasury borrowing, and central bank money creation. These frameworks often lack a thorough conceptualization of endogenous credit money creation and disregard the systemic and procedural dimensions of financing the Green Transition. We propose “Monetary Architecture” as a more comprehensive framework that perceives the monetary and financial system as a constantly evolving and historically specific hierarchical web of interlocking balance sheets. Using the United States as a case study, we stress the importance of a systemic financing dimension that uses all available elasticity space in the monetary architecture while considering a division of labor between firefighting balance sheets such as central banks or treasuries and workhorse balance sheets such as off-balance-sheet fiscal agencies or shadow banks. Procedurally, public workhorses should provide an initial balance sheet expansion and crowd in the rest of the monetary architecture, notably shadow banks, for long-term funding. Firefighters should prevent systemic instability and manage a possible final contraction.

Strategies to Tackle Microfinance Delivery Challenges

Financial inclusion was the most challenging mission as far as the economically weaker sections of society in India. Microfinance was given to the underprivileged for sustaining themselves and starting their own businesses. However, a number of operational and legal barriers that threatened the efficient operation of microfinance institutions (MFIs) restrained its growth. The purpose of this study was to understand the macro and micro challenges involved in the delivery of microfinance services in rural India. For the study of macro and micro issues faced by various institutions in providing microfinance, secondary data collection and informal interviews were done. The effective execution of delivery methods for microfinance was investigated in this article along with techniques that addressed the problems mentioned. In other words, the delivery challenges explained the macro and micro issues that different organisations encountered when delivering microfinance. Strategies were discussed making it workable and adoptable by various institutions participating in microfinance to counter or tackle the macro and micro delivery challenges faced. The findings showed the difficulties of people from rural areas, their inaccessibility to microfinance and the inability of MFIs in controlling transaction costs. The article has highlighted ways to provide as many rural residents as possible with the necessary credit money.

Law of Monetary Circulation: System Analysis

System analysis is necessary to establish the boundaries of the law of money circulation and describe the mechanism of its functioning. The concept of the monetary system, which is an integral category reflecting the structure of monetary circulation, allows establishing systemic links between the institutions of money circulation. The elements of the monetary system accurately describe the composition, boundaries and nature of the internal relations of social relations related to the subject matter of the law of monetary circulation. The institutions of the law of money circulation underlie the relations that make up the content of credit money and mediate their emission, as well as relations for the organization and regulation of money circulation, the need for which is due to the fiat nature of money. The institutions of the law of monetary circulation have different industry affiliations, but there is a close functional relationship between them, due to the unity of purpose and the distribution of tasks within the mechanism of monetary circulation. The legal regulation of the circulation of modern money has a private law and public law basis. Interaction between institutions is implemented within the framework of complex legal relations.

The underexamined role of money and how it undermines Nozick’s case for right libertarianism

In Anarchy, State and Utopia, Nozick presented his doctrine of right libertarianism, largely a contemporary restatement of Locke’s moral imperative that an individual’s rights to his life, liberty, and property are absolute and place limits on state action. Parallelly, Nozick espoused the free-market system as a framework that not only respects individual rights but ensures material benefits. While the free market results in radical inequalities in holdings and widespread dispossession, Nozick treats the process as morally just and any state redistribution through taxation as wrong. However, neither Nozick nor his many critics fully considered the role of money in capitalist free markets, an omission I begin to address.
 
 Nozick asserts that money emerges pre-politically through the uncoerced actions of individuals, and that it derives its value from the commodity that underpins it. This conception of money underpins Nozick’s claims that a minimal state can be just and that the free-market system is a moral, efficient, and neutral allocator of resources. However, Nozick’s approach omits addressing how money’s general acceptability and stability are achieved. Answers can be found in heterodox economic paradigms, which put the state at the center of money creation, rendering money (and the state) incompatible with natural rights. Furthermore, by insisting on money’s commodity nature, Nozick ignores the seventeenth century revolution in money, necessitated by the emergence of free-market capitalism and commodity money’s inability to underpin it. In other words, it is not commodity money but credit money that should be the proper object of Nozick’s analysis. I go on to analyze what credit money is, how it arose, and why some form of it is necessary in a free-market context. Ultimately, I argue that it is not compatible with natural rights and is itself redistributive.
 Key words: money, distributive justice, Nozick, Locke, free market capitalism, natural rights

МЕТОДИЧНИЙ ІНСТРУМЕНТАРІЙ ОЦІНЮВАННЯ ФІНАНСОВОГО ПОТЕНЦІАЛУ У КОНТЕКСТІ МОНІТОРИНГУ ЕФЕКТИВНОСТІ ФІНАНСОВОЇ СТРАТЕГІЇ ПІДПРИЄМСТВА ЕЛЕКТРОЕНЕРГЕТИЧНОЇ ГАЛУЗІ

The article substantiates that the development of the financial architecture, being a component of overall economic stability and financial development, reaches the optimal level with the help of state regulation and the implementation of financial policy. The proposed scientific-methodical approach to assessing the development of the financial architecture is based on the calculation of the composite index of the development of the financial architecture - as a symbiosis of the sub-indices of the following components: banking, budgetary, non-banking, currency, money credit and stock market components. The algorithm of the scientific and methodical approach includes the following stages: the selection of indicators for assessing the development of the financial architecture - in total, the use of 29 indicators is proposed for six sub-indices; normalization of single indicators taking into account the type of their influence on the development of the financial architecture; block assessment taking into account the weight of individual indicators of the development of the financial architecture for each sub-index; calculation of the composite index of financial architecture development; determination of zones of development of financial architecture in accordance with the limit values and identification of the obtained values of the composite index for a certain zone. Approbation of the proposed scientific and methodological approach to assessing the development of the financial architecture for 2016-2021 was carried out. According to the results of the assessment, it was established that the development of the financial architecture of Ukraine was the highest in 2020 and was characterized as satisfactory.

Missing Basic Issues on Credit Money: On the Role of Money in Removing World-wide Growth Barriers (The M. L. Qureshi Memorial Lecture)

Kalecki identifies demand restraint in industrialised and capital restraint in developing countries as the decisive barriers of world-wide growth. Thus, beyond others, it is a matter of financing to foster employment in both types of countries: a rational use of credit money on the international scale could finance additional imports of capital goods by developing countries, whereas industrialised countries could increase their output by trade balance surpluses. This question has been largely debated under various aspects, from the Stamp plan (1958) to the programme of the Commission on International Development Issues (1980). Even if this debate has been superseded by questions of the process and the institutions by which capital is allocated, of the appropriate business management and screening and monitoring, declining growth rates in the last twenty years show that the basic issue of production and distribution of additional real capital remains at stake. Besides institutional obstacles, capital restraint still remains the main bottleneck for development. Basic questions as how to create and use world-wide credit money has to be reconsidered instead of taking backfiring actions to manage actual financial crises. Additional international money supply by planned trade balance deficits of developing countries contributes to world-wide growth, whereas trade balance deficits of the United States are likely to prepare the next financial crises by an excessively increasing dollar supply. A revival of the debate of how to link SDR’s and development financing surely requires to tackle a great number of additional questions, such as how to allocate trade balance deficits and surpluses and how to ensure the acceptance of this world credit money. All in all, it would be a serious attempt to break the money away from the handing down tradition and to transform it into a rationale by abstract reasons and well-founded instrument for economic development.

Rethinking Monetary Sovereignty: The Global Credit Money System and the State

We propose a new conception of monetary sovereignty that acknowledges the reality of today’s global credit money system. Today, the concept is predominantly used to denote states that issue and regulate their own currency. We reject that Westphalian understanding of monetary sovereignty. Instead, we propose a conception of effective monetary sovereignty that focuses on what states are actually able to do in the era of financial globalization. The conception fits the hybridity of the modern credit money system by acknowledging the crucial role not only of central bank money but also of money issued by regulated banks and unregulated shadow banks. These institutions often operate “offshore”, outside of a state’s legal jurisdiction, which makes monetary governance more difficult. Monetary sovereignty consists in the ability of states to effectively govern these different segments of the monetary system and thereby achieve their economic policy objectives.

International monetary hierarchy through emergency US-dollar liquidity: A key currency approach

The notion that the international monetary system is hierarchical has become increasingly common, but the nature, causes, and shape of international monetary hierarchy remain vague. In this article, we develop a monetary theory of international hierarchy based on the “key currency” approach. We perceive the international monetary system as a world-spanning payment system that is inherently hierarchical because it needs central nodes for clearing and settlement. The centrality of the US-Dollar (USD) as global key currency places the US at the apex and makes the Federal Reserve (Fed) the system’s hierarchically highest institution. Other monetary jurisdictions are pushed into peripheral positions and rely on both using and creating USD-denominated credit money instruments “offshore.” Based on this approach, we explain international monetary hierarchy through different mechanisms to supply emergency USD liquidity from the Fed to non-US central banks. Currently, there are three different public mechanisms for non-US central banks to access the Fed’s balance sheet and attain emergency USD liquidity. The first-layer periphery may receive emergency USD liquidity via the Fed’s central bank swap lines. The second-layer periphery can make use of the Fed’s new repo facility for Foreign and International Monetary Authorities to access emergency USD liquidity. The residual mechanism for the third-layer periphery to access emergency USD liquidity is the Special Drawing Rights system, administered by the International Monetary Fund, in which the Exchange Stabilization Fund acts as gatekeeper for the Fed.

НАУКОВО-МЕТОДИЧНИЙ ПІДХІД ОЦІНКИ РОЗВИНЕНОСТІ ФІНАНСОВОЇ АРХІТЕКТУРИ КРАЇНИ

The article substantiates that the development of the financial architecture, being a component of overall economic stability and financial development, reaches the optimal level with the help of state regulation and the implementation of financial policy. The proposed scientific-methodical approach to assessing the development of the financial architecture is based on the calculation of the composite index of the development of the financial architecture - as a symbiosis of the subindices of the following components: banking, budgetary, non-banking, currency, money credit and stock market components. The algorithm of the scientific and methodical approach includes the following stages: the selection of indicators for assessing the development of the financial architecture - in total, the use of 29 indicators is proposed for six sub-indices; normalization of single indicators taking into account the type of their influence on the development of the financial architecture; block assessment taking into account the weight of individual indicators of the development of the financial architecture for each sub-index; calculation of the composite index of financial architecture development; determination of zones of development of financial architecture in accordance with the limit values and identification of the obtained values of the composite index for a certain zone.

The Supermultiplier-Cum-Finance. An Application to the Credit-Led Boom before the 2008 Crash

ABSTRACT The supermultiplier model is gaining momentum. To become a cornerstone of modern macroeconomics, it should explain the dynamics of advanced market economies in a coherent, complete, and simple way. In particular, it is supposed to clarify the possibilities and limits of credit-driven economies, like the one observed in most advanced countries after 1995. This paper contributes to these goals by integrating the Sraffian supermultiplier with the post-Keynesian hypothesis of credit money endogeneity. This hypothesis is somehow modified when autonomous banks are able to accelerate credit above output growth, as happened after 2002. The gap between credit and output growth implies that a part of the loans is financing non-output transactions (land, old houses, shares), usually with a speculative bias. The consequences of a persistent gap are demand depression and asset inflation, as we observed after 2008.

Informational nature of money

The study of the relationship between information and money is one of the most relevant, widely discussed and yet difficult issues to explore. However, many aspects remain unclear, requiring deeper research and understanding. The object of this study was the nature of subjective assessments, their qualitative and quantitative characteristics in relation to the direct exchange of things. The content of objective exchange value as a relative value that is not measurable has been revealed in the article. It carries with it information about the proportion of things exchanged. The quantitative ratio of the value of the available monetary units and the units value of goods exchanged for them determines the price of money. The connection between commodity and credit money has been traced. It has been proved that money fulfills its information function as imaginary, ideal money. It has been concluded about the spontaneous adaptation of the competitive markets, money and prices information system to the conditions of falling purchasing power of money. The results of the study extend knowledge about the informational nature of money and outline perspectives for further research.

Alfred Marshall's Last Challenge: His Book on Economic Progress

Alfred Marshall's Last Challenge: His Book on Economic Progress

The Key to Value (2.0): The Debate Over Commensurability in Neoclassical and Credit Approaches to Money

Neoclassical and credit approaches to money represent dramatically different theories of value. For many within the neoclassical tradition, the market exists as a conceptual enterprise – a place where independent agents compare and rank real goods, exchanging them afterwards to in accord with their preferences. That theory reflects a particular approach to value, identifying it as a pre-existing quality ranked by individual choice. The theory also generates a particular approach to money, assuming that a term of measurement naturally imports commensurability into evaluation. By contrast, public credit approaches suggest that creating commensurability in a world heterogeneous in so many aspects is a profound challenge. Modern political communities have responded by substantiating value in a unit that is cognizable to all: they issue credit tokens that can be set off against widely shared public obligations. That means, first, that value cognizable in money follows rather than pre-exists market activity: it is produced as individuals use credit money as a medium. Second, because value is produced as people use money, the character of that money matters: its nature as credit carries with it an allocative bias. Both governments and private lenders (banks) advance credit in order to spend selectively: they create a credit medium by providing credit to some people relative to others. According to the way money is created, definitionally we might say, individuals will not be equally situated in the process that generates prices. Decisions about value are made in the wake of that fact. The essay closes by contrasting the democratic visions at stake in neoclassical and public credit approaches to value. That exercises suggests that, if the public credit approach better describes money and market, their potential can only be realized by promoting rather than assuming equality.

Monetary Sovereignty and Central Bank Digital Currency

The effective monetary sovereignty of a state is the ability of the state to use monetary instruments to achieve its economic policy objectives. This notion goes beyond the conceptualisation of the traditional Westphalian sovereignty of interference-free discretion, which is necessary because of the hierarchical operational complexity of the fiat and credit money systems in the modern financial system. At the same time, the monetary challenges of the 21st century may also erode the effective monetary sovereignty of states, which can, however, be partially rescued through the introduction of digital central bank money. The paper therefore explores different areas of the impact of digital central bank money on effective monetary sovereignty, taking chartalist monetary theory as a starting point. It shows how central bank digital currency may achieve an improvement in these areas of effective monetary sovereignty.